Applied Materials, whose deposition, etch and ion-implant machines build a chip's circuitry layer by layer, told investors this month that its October quarter should come in around $10.25bn — the largest in the company's history, and roughly 51% above a year earlier. The shares fell more than 5% the next morning.

That reaction is a fair summary of where the toolmakers sit. These companies are paid per machine out of somebody else's capital budget — the fab operators' — and the budgets are visibly rising. Applied has now lifted its forecast for calendar-2026 industry semiconductor systems growth twice, to above 30% from above 20% in February. ASML, the Dutch company that is the world's only supplier of extreme-ultraviolet (EUV) lithography scanners, raised full-year sales guidance to €43-45bn and said its planned 2027 EUV output — about 85 tools, a 30% step up — is nearly fully ordered already. KLA, whose inspection and metrology systems hunt for defects mid-fabrication, guided the September quarter to $4.0bn, up about 26%, and lifted its advanced-packaging process-control revenue outlook to roughly $1.1bn for the calendar year, more than 70% growth.

The numbers behind the guidance

Revenue growth at the large front-end names is accelerating in almost straight lines. ASML has gone from 0.7% year-on-year growth three quarters ago to 4.9%, then 13.2%, then 21.3% last quarter, to €9.33bn. Applied went from -2.1% to 11.4% to 24.8%. KLA moved 7.2%, 11.5%, 15.2%, to a record $3.658bn at a 42.5% operating margin, the best profitability in the group.

Margins are widening with the volume. ASML's gross margin went from 51.6% to 54.0% across those four quarters. Applied's operating margin reached 33.7%, up 330 basis points, its thirteenth consecutive quarter of year-on-year expansion. Both companies also carry a service annuity on the fleet already installed: ASML's installed-base business was €2.9bn of last quarter's total, about 31%, and is guided to grow more than 30% this year; Applied's services arm ran a 30.1% operating margin.

The industry backdrop supports them. SEMI, the equipment trade body, reported record first-quarter billings of $36.55bn, up 14%, and projects 300mm fab equipment spending of $133bn this year and $151bn next. TSMC has guided 2026 capital spending to $52-56bn, up from $40.9bn, and the three big memory makers have reportedly sold out their planned 2027 DRAM and high-bandwidth memory output.

The month was two days

The last thirty days are not the same story. Remove each company's two best sessions and only three of fourteen are still up: Aehr, Teradyne and Kulicke and Soffa. Applied drops to -8.3%, ACM Research to -12.1%, Lam Research to -6.2%. Seven of the nine largest members recorded their single best day on 30 July, the session after Teradyne — which sells the automated test equipment that screens finished chips — reported revenue up 103.9% and said artificial-intelligence work is now more than 60% of its business. Five had their second-best day on 21 July, a memory-led rally on Korean export data in which Micron rose 12%.

Sorted by function, the back-end test and packaging names averaged 36.1% over the month against 3.8% for the front-end wafer-processing group. Over ninety days that gap narrows to 38.4% against 21.9% — the front-end is participating on a quarter view. One caution on the charts: KLA split its stock ten-for-one on 11 June, and unadjusted price series show an apparent 88% collapse that never happened. Adjusted, KLA is up 17.1% over three months and 133.6% over twelve.

Where the business and the price disagree

Aehr Test Systems, a 138-person maker of wafer-level burn-in systems that stress chips before packaging, is the extreme. Fiscal-2026 revenue fell 15.2%, to $50.0m, with a -28.3% operating margin and a $7.1m loss. The shares are up 651% over twelve months. The case rests entirely on the final quarter and after: revenue of $19.75m, up 40.2%, record bookings of $60.7m, a $22m follow-on order from its lead artificial-intelligence processor customer, and fiscal-2027 guidance of $130-150m. At 37.7x forward sales and 231x forward earnings, none of that is unpriced.

Kulicke and Soffa, the Singapore-based maker of the bonders that attach chips to their packages, is the mirror image. Revenue grew 122.6% to $330.4m, September is guided to $375m, and its fluxless thermo-compression bonding line — the tool advanced memory stacking needs — is guided to $150-200m next fiscal year from above $100m this one. The stock is down 0.3% over three months and trades at 29.8x forward earnings against 46.0x trailing, the cheapest forward multiple and widest gap in the group.

Axcelis, which makes ion implanters for mature-node, silicon-carbide and memory production, is the laggard: revenue up 10.6% but operating income down 30%, margin compressed to 9.4%, backlog $452m at a book-to-bill of about 1.0, and China now 46% of sales. ACM Research, selling wet-clean and plating tools mostly into Chinese domestic fabs, grew 36% and raised full-year guidance to $1.125-1.175bn, but gross margin slipped to 46.0% and its forward price/earnings ratio of 42.9x sits above trailing — consensus expects earnings to dip first. Cohu, which makes test handlers and contactors, grew 38.4% with computing orders up 150%, yet its operating margin was 0.2% and automotive is down 24%.

What the prices already assume

ASML trades at 49.4x forward earnings against 56.9x trailing — essentially the ~49x recorded here in May, despite a 27.9% price gain since, because estimates rose in step. Teradyne is at 48.1x forward, also flat against May after a 38% quarter. Applied is 43.6x on this fiscal year and 31.4x on next. KLA's 37.5x forward against 55.9x trailing prices in the 47.8% earnings growth consensus expects. Expensive, but not re-rated: the advance so far has been paid for by revisions rather than enthusiasm.

The setup

Where it stands — Front-end and back-end toolmakers are guiding to accelerating growth, but the past month's gain came from two shared sessions. Would confirm — Applied's October quarter landing near $10.25bn, with its services arm growing above 20%. Would invalidate — Aehr missing its $130-150m fiscal-2027 guide, or Kulicke's September quarter printing below $375m. Watch next — Aehr's August-quarter results, due around early October, the first check on that guide. Valuation — ASML 49.4x forward against 56.9x trailing and ~49x in May; Kulicke 29.8x forward against 46.0x trailing.